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This decision caught the market by surprise, although many operators – including Vodafone – had already cut dividends before the pandemic. BT said COVID-19 crisis had led to the decision.

The financial results for 2019-2020 were in line with expectations: revenues dropped 2% to £22.9 billion and pre-tax profit fell to £2.4 billion from £2.6 billion. This was due in part to accounting changes but also the company has been hit by £95 million in costs related to the coronavirus outbreak.

Investing in the future

CEO Philip Jansen (pictured) explained that withholding dividends would save the company £2.5 billion, which the company needed build out fibre to 20 million premises by the end of this year, as planned.

Chair Jan Du Plessis added that it was also needed to navigate, “the unprecedented uncertainties caused by Covid-19 without compromising our credit rating" and pointed to the critical importance of national infrastructure during the pandemic and beyond, in which the company plays a key role.

Spending on the wrong stuff

Before the results were announced, Jansen was interviewed by BT’s previous CEO, Gavin Patterson, live-streamed by Salesforce. Patterson has been widely criticised for preferring to invest in sports rights, which never made a return on investment, rather than infrastructure.

In the interview, Jansen stressed BT will invest more heavily in response to the pandemic. He said it has a flexible recovery plan based on a range of scenarios, including for three- and six-month lockdown, but expected to emerge from it as a “fundamentally changed” organisation.

A team has been charged with looking for new opportunities in the post-pandemic world while he concentrates on day-to-day operations during the crisis.

Covering unexpected costs

Neil Shah, Head of Research at Edison Group, the investment research company, said: "BT has opted for keeping money back to cover future unexpected costs as well as funding its plan to roll out fibre by scrapping its £2.5 billion dividend. This shouldn’t come as a surprise to shareholders as rising levels or debt and increasing CapEx had already raised questions on short term dividend sustainability.

“BT´s cash saving plan should be able to help them navigate economic uncertainty fuelled by the loss in revenue from sports customers, more cautious spending from international customers and reduced activity as a whole.

“As the day continues, it doesn’t seem like it will get any easier for BT as the O2/Virgin merger set to rival them is set to come through. This are clearly challenging times for the telecoms giant and will be an opportunity to see a greater degree of innovation across all business units of the company."